OTP Drops to Two-Month Low on Loan-Refund Law and Erste Warning

OTP Bank Nyrt., Hungary’s largest lender, slumped to a two-month low as parliament passed a law that requires banks to refund some consumer loan costs and Erste Group Bank AG said it would incur losses.

The shares fell as much as 4.1 percent before closing 1.7 percent lower at 4,239 forint in Budapest, the weakest since May 5. About 1.1 million shares were traded, or 93 percent of the three-month daily average. The benchmark BUX index, in which OTP has a 32 percent weighting, slid 0.9 percent.

The law, part of Prime Minister Viktor Orban’s push to phase out foreign-currency loans, requires lenders to repay borrowers exchange-rate margins and fees collected from unilateral interest-rate increases on as much as $28 billion of consumer loans. Shares of Erste, the second-largest lender by assets in Hungary after OTP, slumped as much as 16 percent in Vienna after the company said it will lose as much as 1.6 billion euros ($2.2 billion) this year on account of its Hungarian and Romanian units.

“Investors have only slowly realized that banks will face a serious loss on the loan-refund law,” Attila Gyurcsik, an analyst at Budapest-brokerage Concorde Ertekpapir Zrt., said by phone today. Analysts at Hungary’s largest brokerage see OTP losing as much as 220 billion forint ($962 million) from the the government’s move.

OTP has advanced 3.4 percent this year, compared with a 0.6 percent decline on the BUX, data compiled by Bloomberg show.

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